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N O T I C E O F E X T R A O R D I N A R Y

G E N E R A L M E E T I N G

and

E X P L A N A T O R Y M E M O R A N D U M

Venue: Dyesol Limited 3 Dominion Place Queanbeyan NSW 2620

Date: 5 March 2014

Time: 10:00am (EDST)

This is an important document. If you are in any doubt as to how to act, you should consult your financial or legal adviser as soon as possible.

Dyesol Limited

ACN 111 723 883

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Contents

Chairman’s letter 3

1 Background 5

2 Shareholder approval required 6

3 Advantages and Disadvantages 7

4 Consequences of Shareholders not approving the Acquisition Proposal 7

5 Directors recommendation 8

6 Independent Expert’s Report 8

7 Information about TASNEE 9

8 Additional Information 10

Glossary 11

Attachment 1: Independent Expert’s Report 12

Attachment 2: Tasnee’s Associates 79

Attachment 3: Resolution 81

Important notices

This Explanatory Memorandum has been prepared to provide Shareholders with material information to enable them to make an informed decision on the business to be conducted at the Extraordinary General Meeting of Dyesol Limited (Dyesol) to be held at 3 Dominion Place, Queanbeyan NSW on Wednesday, 5 March 2014 at 10:00am. The Explanatory Memorandum, including the Independent Expert’s Report, and the Proxy Form are part of the Notice of Meeting.

No investment advice

The information outlined in this Explanatory Memorandum is not financial product advice and has been prepared without reference to your particular investment objectives, financial situation, tax position and particular needs. It is important that you read this Explanatory Memorandum, including the Independent Expert’s Report, in its entirety before making any decision on how to vote on the resolution proposed. If you are in any doubt in relation to these matters, you should consult your investment, financial, taxation or other professional adviser.

Defined terms

Terms used in this Explanatory Memorandum are defined in the Glossary.

Forward looking statements

Statements in relation to future events should not be taken to be a forecast or prediction that those events will occur. Actual events or results may differ materially from events or results

expressed or implied in any forward looking statement and deviations are both normal and expected. The Company, and its officers and staff involved in the preparation of this Explanatory Memorandum do not make any representation or warranty (express or implied) as to the accuracy or likelihood of fulfilment of any forward looking statement, or any events or results expressed or implied in any forward looking statement. Accordingly, you should not place undue reliance on those statements. Any forward looking statements in this Explanatory Memorandum reflect views held by the Company as at 28 January 2014.

Key actions Read this document in full

You should read this Explanatory Memorandum, including the Independent Expert’s Report in full. It contains important information to assist you in your voting decision. If you have any questions about this

Explanatory Memorandum, please contact Kim Hogg, Company Secretary.

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Vote It is important that you vote on the resolutions to be considered at the meeting at 10:00am on Wednesday, 5 March 2014 at 3 Dominion Place, Queanbeyan NSW.

If you are unable to attend the meeting, you may appoint a person (either an individual or a body corporate) to act as your proxy at the meeting by

completing the attached Proxy Form. Proxy Forms must be received by Computershare by no later than 10:00am on 3 March 2014.

Chairman’s letter

Dear Dyesol Shareholders,

The Board of Directors of Dyesol are asking you to support the strategic investment by Tasnee in up to 33.79% of its issued capital and we strongly recommend you read the contents of this Notice of Meeting carefully. To the extent this proposed transaction exceeds issuance capacity under ASX Listing Rule 7.1 and exceeds the takeovers threshold of 20% under the Corporations Act, it requires your approval by ordinary resolution.

The background to this emerging relationship between Dyesol and Tasnee is important to understand. 2011 and 2012 were very challenging years for Dyesol. Universally, the solar market and its providers were under

immense financial pressure. There were several headline international corporate failures. Such was the turmoil that no business objective could be approached with great confidence or certainty. This caused the Dyesol Board to take strong remedial action and identify sources of finance that would provide stability and be better suited to achieve our long-term business development objectives. We resolved to establish a strategic financial

relationship with a partner that understood our business well and, more importantly, could help provide patient capital and allow the Executive to focus on the immense task of building a global solar franchise. In that respect, Tasnee emerged as a strong and dependable candidate.

The proposed Tasnee transaction is not opportunistic or transient. Dyesol has worked closely with Cristal, the 65% Tasnee subsidiary, in the UK for nearly 5 years. From the first day of investment discussions, Tasnee has had a keen focus on the long-term plans for developing the Dyesol Dye Solar Cell technology. Tasnee has reviewed the people, the processes and plans for implementation of the revolutionary DSC technology and clearly likes what it sees. Personally, I am very impressed by their long-term strategic vision. The deep wounds of the Global Financial Crisis remain unhealed in many industry quarters and it is important to move forward in harmony with a partner with ample capacity to provide financial support if required.

Undoubtedly, the main issues for shareholders to consider are ownership dilution and company control. When Tasnee offered their valuable financial support the share price was at a discount to the proposed investment price of 18 cents per share. It is only fair to assess that at the time the share subscription agreement was concluded in March 2013 this had a high element of financial risk. Market visibility was still very poor. Subsequently, Dyesol has enjoyed a strong recovery in its share price, but we are indebted to Tasnee for its support when it really counted. Therefore, we do believe that the dilution to existing shareholders that would result from Tasnee’s substantial additional investment is not unreasonable in the circumstances. Importantly, Dyesol shareholders were invited to participate in a share purchase plan at the price of the Tasnee convertible note and had the opportunity to buy cheaper shares on market for an extended period.

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In relation to control, Tasnee will have a 33.79% shareholding upon full satisfaction of this proposed transaction and single board seat representation on both the Dyesol Limited Board and its Technology Advisory Board, chaired by Professor Michael Graetzel. We welcome this level of co-operation and accountability. Should Tasnee decide to increase its shareholding further or take control of the Board it will need to act within the Australian law which is strongly protective of existing shareholders. As the skills of each company are largely

complementary, we see no motive to do so in the foreseeable future or until a time when the share price is substantially higher and shareholders will once again have the opportunity to opine a potential offer for their shares and for their financial benefit.

The future now looks much clearer. However, an independent expert has concluded that this proposed

transaction is both fair and reasonable from the perspective of existing shareholders. The report was prepared in accordance with the Australian Securities and Investment Commission (ASIC) regulatory guidelines concerning content and independence of Expert Reports. While we may question the low valuations and supporting valuation methodologies, they are expressly conservative and are in alignment with ASIC’s guidance on these matters . The valuation methodologies are, in the opinion of the Dyesol Board, not suited to valuing

pre-revenue technology companies as they do not fully recognise the growth potential of the Company and resulting wealth creation.

The bonds between Dyesol and Tasnee are stronger than ever, fortified by close communication at all levels, shared technical and financial objectives, and a desire to succeed at a challenge which has truly global

implications. Dyesol's enduring vision is to change the way energy is generated and consumed in order to make global human activity more sustainable. We believe all our shareholders share that vision and now we are financially fortified again we will not give up the quest to achieve it. The decision is in your hands, so please join us in supporting the proposed resolution for the benefit of Dyesol.

Most sincerely,

Richard Caldwell Executive Chairman Dyesol

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1.

Background

On 28 February 2013, Dyesol announced that it had entered into a subscription agreement with The National Industrialization Company “TASNEE” (Tasnee).

Dyesol’s rationale for entering into the Subscription Agreement with Tasnee was:

 to secure $4 million funding under the Tasnee Note together with an opportunity to obtain up to a further $16 million funding from Tasnee; and

 to develop a strategic investment relationship with a substantial international business partner. 1.1 Tasnee Note

Under the Subscription Agreement, Tasnee subscribed for a convertible loan note with a face value of $4 million. The Tasnee Note allowed Tasnee to elect to convert all or part of $4.1 million (being the $4 million face value of the convertible loan note plus a $100,000 service fee) into Shares at an issue price of $0.166 per Share.

On 15 November 2013, Dyesol announced that Tasnee had elected to convert the Tasnee Note. On 18 November 2013, Dyesol announced the issue of 24,698,795 Shares to Tasnee in respect of the conversion of the Tasnee Note. Following issue of these Shares, the voting power of Tasnee and its associates in Dyesol has increased from 0% to 9.99%.

Following conversion, Dyesol has no further obligations in respect of the Tasnee Note, and the security arrangements relating to the Tasnee Note will be discharged.

1.2 Subscription Right

Originally, under the Subscription Agreement, Dyesol granted Tasnee the right to subscribe for Shares up to a maximum of $16 million in the aggregate at $0.18 per Share and the Subscription Agreement provided that this Subscription Rightwas exercisable any time before 15 September 2013. The period for exercise of the

Subscription Right was subsequently extended to 27 November 2013.

On 28 November 2013, Dyesol announced that it had agreed to Tasnee exercising its Subscription Right in 2 tranches and that Tasnee had exercised its Subscription Right to subscribe for the first tranche of $10 million Shares at $0.18 per Share, subject to Dyesol Shareholder approval. If Shareholders approve Tasnee’s

subscription, the first tranche of Shares will be issued to Tasnee on the business day after the EGM. Tasnee will also have the right to subscribe for a second tranche of up to a maximum of $6 million Shares (subject to Shareholder approval) at any time before 30 November 2014 (the acquisition of Shareson exercise of the Subscription Right in respect of the first tranche of $10 million Shares and this second tranche being the Proposed Acquisition).

Dyesol has convened the EGM to seek the required Shareholder approval for the Proposed Acquisition, including both the first and second tranches.

If Tasnee exercises the Subscription Right in respect of the second tranche before the EGM, the issue price per Share will be $0.18. Otherwise, the issue price per Share will be the higher of $0.18 per Share and a price representing a 25% discount to the volume weighted average price on the ASX of Shares for the 30 trading day period ending on the date Tasnee gives Dyesol the notice exercising the Subscription Right in respect of the second tranche.

If Shareholders approve the Proposed Acquisition, second tranche Shares will be issued to Tasnee on the business day after the EGM or, if the right to subscribe for the second tranche is only exercised after the EGM, within 10 business days of the date on which Tasnee gives Dyesol the notice exercising its Subscription Right in respect of the second tranche.

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1.3 Effect of Proposed Acquisition

Following the issue of Shares in respect of the Proposed Acquisition:

 Dyesol will receive $10 million cash on issue of Shares following the exercise of the Subscription Right in respect of the first tranche, and up to $6 million on issue of Shares following the exercise of the Subscription Right in respect of the second tranche. Dyesol intends to use these funds to pursue its current programme for developing the DSC technology.

 Tasnee will be issued an additional 55,555,556 Shares in respect of the first tranche, and up to a maximum of 33,333,333 Shares in respect of the second tranche (or a lesser number of Shares, if the 30 trading day volume weighted average price of Shares exceeds $0.18 or Tasnee elects to subscribe for less than the full $6 million of Shares).

Following issue of the first tranche Shares, Tasnee will hold (and have a relevant interest in) a total of 80,254,351 Shares and the voting power of Tasnee and its associates in Dyesol will increase from 9.99% to 26.5%.

If the maximum number of Shares that can be issued in respect of the second tranche is issued, Tasnee will hold (and have a relevant interest in) a total of 113,587,684 Shares and the voting power of Tasnee and its associates in Dyesol will increase from 26.5% to a maximum of 33.79% (subject to dilution by any Share issues occurring in the interim).

Shares issued to Tasnee will be fully paid, will rank equally with other Shares which are already on issue at the relevant time and will be freely tradeable.

 While Tasnee’s shareholding remains above 10%, it will be entitled to nominate a Director for appointment to the Board.

2.

Shareholder approval required

Section 606 of the Corporations Act prohibits an acquisition of a relevant interest in voting shares that would cause a person’s voting power to increase from below 20% to more than 20%, or from a starting point that is above 20% and below 90%, subject to certain exceptions. Item 7 of section 611 of the Corporations Act provides an exception for acquisitions approved by a company’s shareholders.

Dyesol is seeking approval at this meeting for the purposes of Item 7 of section 611 of the Corporations Act for the acquisition of a relevant interest by Tasnee and its associates upon conversion of the Tasnee Note and exercise of the Subscription Right.

Shareholder approval is required for the Proposed Acquisition, because Tasnee’s acquisition of relevant interests in Shares under the Proposed Acquisition will cause Tasnee’s voting power to exceed the 20% threshold specified in section 606 of the Corporations Act.

The Corporations Act and ASIC policy (in particular, ASIC Regulatory Guide 74) set out the information that needs to be given to shareholders in connection with a proposal to seek shareholder approval under Item 7 of section 611 of the Corporations Act. To meet these requirements, Dyesol has:

 prepared this Explanatory Memorandum; and

 engaged the Independent Expert to prepare an Independent Expert’s Report.

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3.

Advantages and Disadvantages

3.1 Advantages

 If the Proposed Acquisition proceeds, Dyesol will receive between $10 million and $16 million of additional cash, to fund further development of its DSC technology, including the conversion of that technology from a laboratory procedure into a commercially viable and scalable manufacturing operation. The additional funding will also enhance Dyesol’s ability to enforce its contractual rights and mitigate contract risks and there will be less pressure on Dyesol’s existing cash.

 A strategic investment by a large multi-national industrial company such as Tasnee is expected:

- to enhance Dyesol’s ability to raise additional capital from both domestic and international markets and attract lower cost debt funding;

- to provide Dyesol with improved access to markets and potential business partners; and - to improve Dyesol’s bargaining power with potential suppliers and customers.

 An ongoing investor relationship with Tasnee is also likely to allow Dyesol access to lower cost titanium dioxide based materials, which Dyesol currently obtains from National Titanium Dioxide Company

(Cristal), a 65% owned subsidiary of Tasnee. This has the potential to reduce production costs when Dyesol transitions into production.

 The cost of the capital provided by Tasnee is within the value range of Dyesol’s equity, as assessed by the Independent Expert.

3.2 Disadvantages

 The Proposed Acquisition will dilute the combined shareholding of existing Shareholders (excluding Tasnee) from its current 90.01% potentially down to 66.21%. Shareholders’ ability to benefit from potential future increases in the value of Dyesol will be correspondingly diluted. However, any alternative funding would also be likely to dilute the interest held by existing Shareholders.

 Tasnee will hold up to a maximum of 33.79% of the Shares on issue and will be the largest Shareholder in the company. Based on current shareholdings as at 28 January 2014, the next largest Shareholder, JP Morgan Nominees Australia Ltd, will hold approximately 25.29% of the Shares. Tasnee will be able to block

resolutions to approve matters requiring a 75% majority vote, including, for example, resolutions to amend Dyesol’s constitution. It is also likely to have a significant influence on the outcome of votes to approve matters requiring an ordinary majority vote, including, for example, resolutions to appoint Directors. This may materially reduce other Shareholders’ ability to influence the direction of the company.

 Tasnee’s 33.79% holding may dissuade potential acquirers of the company from making a takeover offer in the future. This may adversely affect the Dyesol share price and reduce the opportunity for Shareholders to receive a takeover premium in the future. However, as at the date of this Explanatory Memorandum, Dyesol has not received any approaches, or any alternate or superior offers.

 Dyesol’s will have a lower free float (on a proportional basis), which may reduce liquidity and adversely affect the market value of Shares.

4.

Consequences of Shareholders not approving the Acquisition Proposal

If Shareholders do not approve the Proposed Acquisition:

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 Tasnee will still have the option to subscribe for additional Shares at $0.18, subject to Tasnee’s and its

associates’ voting power not exceeding 20%, and subject to Dyesol not exceeding its 15% placement capacity. Based on Dyesol’s current issued Share capital, up to an additional 24,763,381 Shares could be issued to Tasnee without requiring Shareholder approval.

 Dyesol will not receive $16 million cash from Tasnee and will need to seek funding to develop the DSC technology from other sources. There is no certainty that funding will be available or that the terms on which funding may be available will be as favourable to the company as those agreed with Tasnee.Tasnee will still have the right to participate in any issue of equity securitiesoccurring before27 May 2014 on a proportionate basis.

 Following conversion of the Tasnee Note, Tasnee acquired 24,698,795 Shares, giving it a 9.99% stake. Tasnee will be able to sell these Shares at any time. The prospect of any such sale may put downward pressure on the market price of Shares.

 The market price of Shares may decrease.

 Dyesol will be free to pursue other proposed transactions. At this stage, the Directors have not received any other proposals to invest in, or acquire, the company.

5.

Directors’ recommendation

5.1 Recommendation

The Directors have considered the advantages and disadvantages of the Proposed Acquisition, the consequences of the Proposed Acquisition not being approved and alternative courses of action open to Dyesol.

Having considered these matters, the Directors unanimously recommend that Shareholders vote in favour of the resolution to approve the Proposed Acquisition for the reasons set out below:

 the Proposed Acquisition will provide Dyesol with sufficient cash to enable it to make significant progress in developing and commercialising its DSC technology;

 the investment provides an opportunity to strengthen Dyesol’s strategic relationship with Tasnee, a strong international partner committed to developing DSC technology; and

 the Independent Expert has concluded that the Proposed Acquisition is fair and, in the absence of a superior proposal, reasonable to Shareholders not associated with Tasnee. As at 28 January 2014 the Board has not received any other proposals to invest in or acquire the company.

5.2 Directors’ voting intentions

Each Director intends to vote all Shares that they hold or control in favour of the resolution to approve the Proposed Acquisition.

All Directors voted in favour of the proposal to put the resolution to approve the Proposed Acquisition to Shareholders.

5.3 Directors’ interests

None of the Directors have an interest in the outcome of the resolution on the Proposed Acquisition other than their interests as Shareholders (in common with all other Shareholders).

6.

Independent Expert’s Report

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Dyesol appointed the Independent Expert to prepare a report to Shareholders opining on the Proposed Acquisition. A copy of the Independent Expert’s Report is attached in Attachment 1.

The Independent Expert has concluded that, in the absence of a superior offer, the Proposed Acquisition is fair and reasonable to Shareholders not associated with Tasnee.

Reasons for the Independent Expert’s conclusion, together with an assessment of the Proposed Acquisition are set out in the Independent Expert’s Report. The Board recommends that you read the Independent Expert’s Report in its entirety.

7.

Information about Tasnee

7.1 Tasnee’s business

Tasnee is a $5 billion diversified industrial company listed on the Saudi Arabian Stock Exchange (Taduwal) and the world’s second largest producer of titanium dioxide. Tasnee’s business includes the manufacture of petrochemicals and chemicals, investment in the engineering and mechanical industries, the management and acquisition of industrial projects and the marketing of industrial products produced by those projects. It is strongly vertically integrated and owns several titanium mines in Australia, principally through its acquisition of Bemax Resources.

Tasnee also has majority interests in a number of joint ventures involved in the manufacture and marketing of industrial products including petrochemicals such as ethylene, polyethylene, propylene and polypropylene (Tasnee and Sahara Olefins Co.), titanium dioxide (The National Titanium Dioxide Company (Cristal)), liquid batteries for cars and other industrial uses (National Batteries Co. (Battariat)), lead (National Lead Smelting Co. (Rassas)), plastic products (Al-Rowad National Plastic Co).

Cristal owns Cristal Mining Australia Limited, an Australian-based mineral sands exploration, mining and processing company.

7.2 Control of Tasnee

The largest shareholders of Tasnee are set out in the following table.

7.3 Tasnee’s associates

A list of Tasnee’s associates is set out in Attachment 2.

7.4 Tasnee’s interest in Shares and in transactions with Dyesol

SHAREHOLDER SHAREHOLDING

General Organization for Social Insurance (GOSI) 8.6%

Al-Shair Co. 7.8%

Gulf Investment Corporation 7.3%

Kingdom Holdings 6.2%

Olayan Group 5.8%

SPIMACO 5.2% Ikarus 5.2%

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Neither Tasnee nor any of its directors or associates:

 has a relevant interest in any Shares; or

 is party to any transaction, agreement, arrangement or understanding with Dyesol (or any of its associates) which is conditional on Shareholders approving the Proposed Acquisition or is material in the context of the Proposed Acquisition (apart from the Subscription Agreement, the material terms of which are described in sections 1 and 9.1).

7.5 Tasnee’s intentions

Tasnee has advised Dyesol that following completion of the Proposed Acquisition it intends that Dyesol continue to pursue its current programme for developing the DSC technology. Tasnee has no current intention to seek to use its voting rights to influence the company:

 to make any changes to Dyesol’s business;

 to provide further capital or loan funds to Dyesol;

 to redeploy, restructure or otherwise change the future employment of Dyesol’s present employees;

 to transfer any of Dyesol’s assets to Tasnee (or any of its associates) or otherwise redeploy the fixed assets of Dyesol; or

 to change Dyesol’s existing policies in relation to financial matters or dividends.

8.

Additional information

8.1 Other rights under the Subscription Agreement

Under the Subscription Agreement, in addition to its Subscription Rights, Tasnee has anti-dilution rights. The anti-dilution rights give Tasnee the right to participate in any issue by Dyesol of equity securities occurring before27 May 2014 on a proportionate basis.

8.2 No Listing Rule approval required

Further approval for the issue of Shares on exercise of the Second Subscription Rights, will not be required under Listing Rule 7 if the Proposed Acquisition is approved for the purpose of Item 7 of section 611 of the Corporations Act: see Listing Rule 7.2 Item 16.

8.3 No other material information

Other than the information provided in this Explanatory Memorandum, Dyesol, Tasnee or their associates are not aware of any information that would be reasonably required by Shareholders in order to decide whether or not to approve the Proposed Acquisition.

8.4 ASIC

A draft of the Notice of Meeting and this Explanatory Memorandum (including the Independent Expert's Report) has been provided to ASIC.

Neither ASIC nor any of its officers takes any responsibility for the contents of the Notice of Meeting or this Explanatory Memorandum.

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Glossary

ASX means ASX Limited, and, where applicable, the securities exchange operated by ASX. associates has the meaning given to that term under the Corporations Act.

Listing Rules means the Listing Rules of the ASX. Board means the board of directors of Dyesol.

Corporations Act means the Corporations Act 2001 (Cth).

Corporations Regulations means the Corporations Regulations 2001 (Cth). Director means a director of Dyesol.

Dyesol or the Company means Dyesol Limited (ACN 111 723 883).

EGM means the extraordinary general meeting convened by the Notice of Meeting. Independent Expert means BDO Corporate Finance (WA) Pty Ltd (ACN 124 031 045).

Independent Expert’s Report means the independent expert’s report prepared by the Independent Expert and included in Attachment 1 to this Explanatory Memorandum.

Notice of Meeting means this notice of EGM including this Explanatory Memorandum.

Proposed Acquisition meansTasnee’s acquisition of Shareson exercise of the Subscription Rights. Proxy Form means the proxy form accompanying the Notice of Meeting.

Share means a fully paid ordinary share in the capital of the Company. Shareholder means a member of Dyesol, as defined in Dyesol’s constitution.

Subscription Agreement means the subscription agreement between Dyesol and Tasnee entered into on or about 28 February 2013, as extended and amended.

Subscription Right meansthe rights granted by Dyesol to Tasnee to subscribe for Shares up to a maximum of $16 million in the aggregate, in 2 tranches, under the Subscription Agreement.

Tasnee means the National Industrialization Company “TASNEE”, a company incorporated in the Kingdom of Saudi Arabia.

Tasnee Note meansthe convertible loan note with a face value of $4 million issued by Dyesol to Tasnee on 14 March 2013 pursuant to the Subscription Agreement.

DYESOL LIMITED

Independent Expert’s Report

Financial Services Guide

19 December 2013

BDO Corporate Finance (WA) Pty Ltd ABN 27 124 031 045 (‘we’ or ‘us’ or ‘ours’ as appropriate) has

been engaged by Dyesol Limited (‘Dyesol’) to provide an independent expert’s report on the proposal to raise $16 million through a share placement to National Industrialization Company of Saudi Arabia or a related entity (‘Tasnee’). You will be provided with a copy of our report as a retail client because you are a shareholder of Dyesol.

Financial Services Guide

In the above circumstances we are required to issue to you, as a retail client, a Financial Services Guide (‘FSG’). This FSG is designed to help retail clients make a decision as to their use of the general financial product advice and to ensure that we comply with our obligations as financial services licensees.

This FSG includes information about:

Who we are and how we can be contacted;

The services we are authorised to provide under our Australian Financial Services Licence, Licence No. 316158;

Remuneration that we and/or our staff and any associates receive in connection with the general financial product advice;

Any relevant associations or relationships we have; and

Our internal and external complaints handling procedures and how you may access them.

Information about us

BDO Corporate Finance (WA) Pty Ltd is a member firm of the BDO network in Australia, a national association of separate entities (each of which has appointed BDO (Australia) Limited ACN 050 110 275 to represent it in BDO International). The financial product advice in our report is provided by BDO Corporate Finance (WA) Pty Ltd and not by BDO or its related entities. BDO and its related entities provide services primarily in the areas of audit, tax, consulting and financial advisory services.

We do not have any formal associations or relationships with any entities that are issuers of financial products. However, you should note that we and BDO (and its related entities) might from time to time provide professional services to financial product issuers in the ordinary course of business.

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When we provide the authorised financial services we are engaged to provide expert reports in connection with the financial product of another person. Our reports indicate who has engaged us and the nature of the report we have been engaged to provide. When we provide the authorised services we are not acting for you.

General Financial Product Advice

We only provide general financial product advice, not personal financial product advice. Our report does not take into account your personal objectives, financial situation or needs. You should consider the appropriateness of this general advice having regard to your own objectives, financial situation and needs before you act on the advice.

Financial Services Guide

Fees, commissions and other benefits that we may receive

We charge fees for providing reports, including this report. These fees are negotiated and agreed with the person who engages us to provide the report. Fees are agreed on an hourly basis or as a fixed amount depending on the terms of the agreement. The fee payable to BDO Corporate Finance (WA) Pty Ltd for this engagement is approximately $32,000.

Except for the fees referred to above, neither BDO, nor any of its directors, employees or related entities, receive any pecuniary benefit or other benefit, directly or indirectly, for or in connection with the provision of the report.

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All our employees receive a salary. Our employees are eligible for bonuses based on overall productivity but not directly in connection with any engagement for the provision of a report. We have received a fee from Dyesol for our professional services in providing this report. That fee is not linked in any way with our opinion as expressed in this report.

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Complaints resolution

Internal complaints resolution process

As the holder of an Australian Financial Services Licence, we are required to have a system for handling complaints from persons to whom we provide financial product advice. All complaints must be in writing addressed to The Complaints Officer, BDO Corporate Finance (WA) Pty Ltd, PO Box 700 West Perth WA 6872.

When we receive a written complaint we will record the complaint, acknowledge receipt of the complaint within 15 days and investigate the issues raised. As soon as practical, and not more than 45

days after receiving the written complaint, we will advise the complainant in writing of our

determination.

Referral to External Dispute Resolution Scheme

A complainant not satisfied with the outcome of the above process, or our determination, has the right to refer the matter to the Financial Ombudsman Service (‘FOS’). FOS is an independent organisation that has been established to provide free advice and assistance to consumers to help in resolving complaints relating to the financial service industry. FOS will be able to advise you as to whether or not they can be of assistance in this matter.

Our FOS Membership Number is 12561. Further details about FOS are available at the FOS website

www.fos.org.au or by contacting them directly via the details set out below. Financial Ombudsman Service

GPO Box 3 Melbourne VIC 3001 Toll free: 1300 78 08 08 Facsimile: (03) 9613 6399 Email: [email protected] Contact details

You may contact us using the details set out on page 1 of the accompanying report.

TABLE OF CONTENTS

1. Introduction 1

2. Summary and Opinion 2

3. Scope of the Report 5

4. Outline of the Proposal 6

5. Profile of Dyesol Limited 7

6. Profile of the National Industrialization Company of Saudi Arabia (Tasnee) 14

7. Economic analysis 17

8. Industry analysis 17

9. Valuation approach adopted 20

10. Valuation of Dyesol Limited prior to the Proposal 22

11. Valuation of Dyesol Limited following the Proposal 30

12. Is the Proposal fair? 32

13. Is the Proposal reasonable? 32

14. Conclusion 37

15. Sources of information 37

16. Independence 38

17. Qualifications 38

18. Disclaimers and consents 39

Appendix 1 – Glossary

Appendix 2 – Valuation Methodologies

Appendix 3 - Independent Valuation Report prepared by Valutech Pty Ltd

19 December 2013 The Directors Dyesol Limited 3 Dominion Place QUEANBEYAN NSW 2620 Dear Sirs

INDEPENDENT EXPERT’S REPORT

1.

Introduction

On 28 February 2013, Dyesol Limited (‘Dyesol’ or ‘the Company’) announced that the National Industrialization Company of Saudi Arabia (‘Tasnee’) had invested $4 million by way of a 15 month redeemable loan note, convertible into Dyesol shares at $0.166 per share (‘Convertible Note’). The Company also announced that, during a six month exclusivity period, Tasnee or a related entity may elect to invest an additional $16 million through a placement of approximately 88.9 million shares at an issue price of $0.18 per share (‘Additional Investment’).

On 16 September 2013, Dyesol announced that it had agreed to extend the exclusivity period by two months to 14 November 2013 to allow Tasnee to complete its due diligence. On 15 November 2013, Dyesol announced that it had agreed to provide Tasnee with a further two week extension until 27 November 2013 to allow corporate governance procedures and documentation required at the Tasnee subsidiary level before formal confirmation of Tasnee’s investment decision. It was also announced that Tasnee had agreed to immediately convert the Convertible Note into ordinary shares at the conversion price of $0.166 per share. Tasnee was issued approximately 24.7 million shares, representing a 9.99% interest in the share capital of Dyesol.

On 28 November 2013, Dyesol announced that the Additional Investment by Tasnee will now be made in two tranches. The first tranche of $10 million is convertible immediately into shares at $0.18 per share (subject to shareholder approval), with the second tranche of $6 million (also subject to shareholder approval) being an option to convert to shares at $0.18 per share, if the investment is made at or before the Extraordinary General Meeting to be held to approve the Additional Investment. If the investment is made after the Extraordinary General Meeting and within one year, then the investment is convertible to shares at a 25% discount to the 30 day volume weighted average price at the time of conversion.

The Additional Investment is subject to shareholder approval, to be sought under item 7 section 611 of the Corporations Act 2001 (Cth) (‘the Act’) to the extent that it will result in Tasnee’s shareholding in the Company increasing to an amount greater than 20%. The Additional Investment will result in Tasnee holding a maximum interest of 33.79% in the share capital of Dyesol.

2.

Summary and Opinion

2.1

Purpose of the report

The directors of Dyesol have requested that BDO Corporate Finance (WA) Pty Ltd (‘BDO’) prepare an independent expert’s report (‘our Report’) to express an opinion as to whether or not the issue of shares as consideration for the Additional Investment (‘the Proposal’) is fair and reasonable to the non associated shareholders of Dyesol (‘Shareholders’).

Our Report is prepared pursuant to item 7 section 611 of the Act and is to be included in the Explanatory Memorandum for Dyesol in order to assist the Shareholders in their decision whether to approve the Proposal.

2.2

Approach

Our Report has been prepared having regard to Australian Securities and Investments Commission (‘ASIC’), Regulatory Guide 111 (‘RG 111’), ‘Content of Expert’s Reports’ and Regulatory Guide 112 (‘RG 112’) ‘Independence of Experts’.

In arriving at our opinion, we have assessed the terms of the Proposal as outlined in the body of this report. We have considered:

How the value of a Dyesol share prior to the Proposal on a control basis compares to the value of a Dyesol share following the Proposal on a minority basis;

The likelihood of a superior alternative offer being available to Dyesol;

Other factors which we consider to be relevant to the Shareholders in their assessment of the Proposal; and

The position of Shareholders should the Proposal not proceed.

2.3

Opinion

We have considered the terms of the Proposal as outlined in the body of this report and have concluded that the Proposal is fair and reasonable to Shareholders.

2.4

Fairness

In section 12, we have determined that the value of a Dyesol share prior to the Proposal on a controlling basis compares to the value of a Dyesol share following the Proposal on a minority basis, as detailed below. Ref Low $ Preferred $ High $ Value of a Dyesol share prior to the Proposal on a control basis 10 0.120 0.134 0.149 Value of a Dyesol share following the Proposal on a minority

basis

11 0.129 0.150 0.173

The above valuation ranges are graphically presented below:

The above pricing indicates that the value of a Dyesol share following the Proposal on a minority basis is greater than the value of a Dyesol share prior to the Proposal on control basis. Therefore, the Proposal is fair for Shareholders.

Our valuation of a Dyesol share, both prior to the Proposal and following the Proposal, has been based on the net asset value methodology. Asset based methods ignore the possibility that the entity’s value could exceed the realisable value of its assets at the valuation date as they do not recognise all the potential value of intangible assets such as management, intellectual property and goodwill. This can be

particularly significant if the growth potential of a company is substantial.

In section 10.2, we analysed the quoted market prices for Dyesol securities up until the announcement of the Additional Investment. This valuation methodology was used as a secondary valuation approach to value a Dyesol share prior to the Proposal on a control basis. Our analysis concluded that the value of a Dyesol share, including a premium for control was between $0.182 and $0.224, with a midpoint value of $0.203. We concluded that this valuation approach is not considered appropriate to use as our primary valuation methodology and have explained the differences between the valuations obtained under the net assets value and quoted market price approaches as follows:

The net asset value is lower than the quoted market price value range, which is not uncommon for technology companies, which often trade at a premium to their net asset value. This is because investors anticipate some potential upside or ‘bluesky’ prospects for the company which are factored into the share price in advance of any such value being warranted;

The quoted market price value reflects investors’ perception of the future prospects of Dyesol and may have taken into account the progress that Dyesol has been making in taking DSC from the laboratory to the manufacturing plant; and

Our share price analysis in section 10.2 indicates that there is not a deep market for the Company’s shares with only 30% of the Company’s share capital traded in the twelve months prior to the announcement.

Had we relied on the quoted market price approach adjusted to include a control premium to value a Dyesol share prior to the Proposal and compared that to our net asset value on a minority basis following the Proposal, our conclusion would be that the Proposal would not be fair for Shareholders.

We note that a significant amount of time has passed since the announcement of the Additional Investment and the date of our Report. Therefore, we have also analysed Dyesol’s share price, trading volumes and key announcements up until the date of our Report in sections 5.1 and 13.3. We noted that during this period there was a significant uplift in the share price of Dyesol following an announcement made on 8 May 2013 regarding a ‘technical breakthrough’ and significant volumes of Dyesol shares were

0.00 0.05 0.10 0.15 0.20 0.25 0.30 Value of a Dyesol share following

the Proposal

Value of a Dyesol share prior to the Proposal

Value ($) Valuation Summary

traded in the following weeks. Our analysis over this period indicated that Dyesol shares exhibited significant volatility and if we were to exclude the significant trading volumes following the

announcement on 8 May 2013, there was a lack of depth in the trading of Dyesol securities. Therefore, we are unable to conclude that the quoted market price methodology over this period could be considered sufficiently reliable to provide us with a reasonable basis for our valuation.

2.5

Reasonableness

We have considered the analysis in section 13 of this report, in terms of both advantages and disadvantages of the Proposal; and

other considerations, including the position of Shareholders if the Proposal does not proceed and the consequences of not approving the Proposal.

In our opinion, the position of Shareholders if the Proposal is approved is more advantageous than the position if the Proposal is not approved. Accordingly, in the absence of any other relevant information and/or a superior proposal we believe that the Proposal is reasonable for Shareholders.

The respective advantages and disadvantages considered are summarised below:

ADVANTAGES AND DISADVANTAGES

Section Advantages Section Disadvantages

13.4.2 Immediate capital injection 13.5.1 Dilution of existing Shareholders’ interests 13.4.3 Introduces an experienced partner with

access to funds

13.5.2 Tasnee will gain an increased level of control over Dyesol

13.4.4 The Company retains cash to use for other purposes

13.5.3 Decreases the likelihood of a takeover offer

13.4.5 No changes to current operating arrangements apart from potential addition to the Board

13.4.6 Synergistic benefits to Dyesol

Other key matters we have considered include:

Section Description

13.1 Alternative proposals

13.2 Practical level of control obtained by Tasnee 13.3 Potential decline in Dyesol share price

3.

Scope of the Report

3.1

Purpose of the Report

Section 606 of the Corporations Act Regulations expressly prohibits the acquisition of shares by a party if that acquisition will result in that person (or someone else) holding an interest in 20% or more of the issued shares of a public company, unless a full takeover offer is made to all shareholders.

As at the date of this report Tasnee holds 9.99% of the issued capital of Dyesol as a result of the conversion of the Convertible Note. If the Proposal is approved then Tasnee’s holding in Dyesol will increase to a maximum of 33.79%.

Section 611 permits such an acquisition if the shareholders of that entity have agreed to the issue of such shares. This agreement must be by resolution passed at a general meeting at which no votes are cast in favour of the resolution by any party who is associated with the party acquiring the shares, or by the party acquiring the shares. Section 611 states that shareholders of the company must be given all information that is material to the decision on how to vote at the meeting.

Regulatory Guide 74 issued by ASIC deals with ‘Acquisitions Agreed to by Shareholders’. It states that the obligation to supply shareholders with all information that is material can be satisfied by the non-associated directors of Dyesol, by either:

undertaking a detailed examination of the Proposal themselves, if they consider that they have sufficient expertise; or

by commissioning an Independent Expert's Report.

The directors of Dyesol have commissioned this Independent Expert's Report to satisfy this obligation.

3.2

Regulatory guidance

Neither the Listing Rules nor the Corporations Act defines the meaning of ‘fair and reasonable’. In determining whether the Proposal is fair and reasonable, we have had regard to the views expressed by ASIC in RG 111. This regulatory guide provides guidance as to what matters an independent expert should consider to assist security holders to make informed decisions about transactions.

This regulatory guide suggests that where the transaction is a control transaction, the expert should focus on the substance of the control transaction rather than the legal mechanism to affect it. RG 111 suggests that where a transaction is a control transaction, it should be analysed on a basis consistent with a takeover bid.

In our opinion, the Proposal is a control transaction as defined by RG 111 and we have therefore assessed the Proposal as a control transaction to consider whether, in our opinion, it is fair and reasonable to Shareholders.

3.3

Adopted basis of evaluation

RG 111 states that a transaction is fair if the value of the offer price or consideration is greater than the value of the securities subject of the offer. This comparison should be made assuming a knowledgeable and willing, but not anxious, buyer and a knowledgeable and willing, but not anxious, seller acting at arm’s length. When considering the value of the securities subject of the offer in a control transaction the expert should consider this value inclusive of a control premium. Further to this, RG 111 states that a transaction is reasonable if it is fair. It might also be reasonable if despite being ‘not fair’ the expert

believes that there are sufficient reasons for security holders to accept the offer in the absence of any higher bid.

Having regard to the above, BDO has completed this comparison in two parts:

A comparison between the value of a Dyesol share prior to the Proposal on a control basis and the value of a Dyesol share following the Proposal on a minority basis (fairness – see section 12 “Is the Proposal Fair?”); and

An investigation into other significant factors to which Shareholders might give consideration, prior to approving the Proposal, after reference to the value derived above (reasonableness – see section 13 “Is the Proposal Reasonable?”).

RG 111.31 stipulates that in a control transaction a comparison should be made between the value of the target entity’s securities prior to the Proposal on a controlling basis and the value of the target entity’s securities following the Proposal allowing for a minority discount. This comparison reflects the fact that the acquirer is obtaining or increasing control of the target entity and the security holders in the target entity will no longer hold a controlling interest. As such we have valued a share in Dyesol prior to the Tasnee investment on a controlling basis and compared this to the value of a share in Dyesol following the Proposal on a minority basis.

This assignment is a Valuation Engagement as defined by Accounting Professional & Ethical Standards Board professional standard APES 225 ‘Valuation Services’ (‘APES 225’).

A Valuation Engagement is defined by APES 225 as follows:

“an Engagement or Assignment to perform a Valuation and provide a Valuation Report where the Valuer is free to employ the Valuation Approaches, Valuation Methods, and Valuation Procedures that a reasonable and informed third party would perform taking into consideration all the specific facts and circumstances of the Engagement or Assignment available to the Valuer at that time.”

This Valuation Engagement has been undertaken in accordance with the requirements set out in APES 225.

4.

Outline of the Proposal

On 28 February 2013 Dyesol announced a $4 million investment by Tasnee by way of a 15 month

redeemable loan note, convertible into Dyesol shares at $0.166 per share. The investment was subject to an initial six month exclusivity period (‘Exclusivity Period’) within which the companies were to negotiate partnership and investment possibilities, including a potential additional investment by Tasnee of up to $16 million. During the Exclusivity Period, Tasnee had the option to subscribe for Dyesol shares at an issue price of $0.18 per share to a maximum value of $16 million.

Under the terms of the Convertible Note Dyesol was allowed to raise an additional $2 million through the issue of shares to existing shareholders at an issue price of $0.166 per share (‘Share Purchase Plan’). On 11 June 2013, Dyesol announced that it received $22.53 million in applications for the Share Purchase Plan. As a result of the oversubscription, the Company and Tasnee agreed to increase the size of the Share Purchase Plan to $4 million, at the previously agreed price of $0.166 per share.

On 16 September 2013, Dyesol announced that it would extend the Exclusivity Period for an additional two months to 14 November 2013 in order to allow Tasnee complete its due diligence to its satisfaction. On 15 November 2013, Dyesol announced that it had agreed to provide Tasnee with a further two week extension until 27 November 2013 to allow corporate governance procedures and documentation required

at the Tasnee subsidiary level before formal confirmation of Tasnee’s investment decision. It was also announced that Tasnee had agreed to immediately convert the Convertible Note into ordinary shares at the conversion price of $0.166 per share.

On 28 November 2013, Dyesol announced that the Additional Investment by Tasnee will now be made in two tranches. The first tranche of $10 million is convertible immediately into shares at $0.18 per share (subject to shareholder approval), with the second tranche of $6 million (also subject to shareholder approval) being an option to convert to shares at $0.18 per share, if the investment is made at or before the Extraordinary General Meeting to be held to approve the Additional Investment. If the investment is made after the Extraordinary General Meeting and within one year, then the investment is convertible to shares at a 25% discount to the 30 day volume weighted average price at the time of conversion.

As at the date of this report Tasnee owns 24,698,795 shares in Dyesol as a result of the conversion of the Convertible Note which represents 9.99% of Dyesol’s issued capital. If Tasnee proceed with the Additional Investment then it will increase this holding to a maximum of 33.79% of the issued capital of Dyesol. This will dilute Shareholders’ interests from 90.01% to 66.21% of the issued capital. These potential changes in shareholding are summarised in the table below.

Source: BDO analysis

The above table assumes that Tasnee exercise its option prior to the Extraordinary General Meeting and convert the full amount of the Additional Investment, being $16 million, at $0.18 per share.

5.

Profile of Dyesol Limited

5.1

History

Dyesol was incorporated on 9 November 2004 as Dyesol Pty Ltd in order to acquire Dye Solar Cell (‘DSC’) technology from Sustainable Technologies International Pty Ltd (‘STI’) and Greatcell Solar S.A.

DSC technology was invented in Switzerland in 1988 by Professor Michael Graetzel. The technology is a process of turning light into energy, similar to photosynthesis in plants, and the current generation uses titanium dioxide nanoparticulate films coated with an archival dye. The Company’s founders first acquired the Ecole Polytechnique Federale de Lausanne DSC patents in 1994. The license was then transferred to STI. Dyesol then acquired the license through its acquisition of STI after listing on the Australian Securities Exchange (‘ASX’) on 31 August 2005. The Company also has secondary listings on the Deutsche Borse and US OTCQX exchanges.

More recently, on 27 February 2013, the Company announced Tasnee’s involvement with Dyesol, through the issue of the Convertible Note and the Additional Investment. On 8 May 2013, Dyesol announced to the market that it had achieved a technical breakthrough relating to its Dye Solar Cell technology. This resulted in a significant increase in the value of a Dyesol share on the ASX, and it has continued to trade

Other

Tasnee Shareholders Total

Issued Shares as at the date of this Report 24,698,795 222,612,092 247,310,887

% holdings as at date of this Report 9.99% 90.01% 100.00%

Shares to be issued as consideration for the Additional Investment 88,888,889 - 88,888,889

Issued Shares after completion of the Proposal 113,587,684 222,612,092 336,199,776

% holdings after completion of the Proposal 33.79% 66.21% 100.00%

at a value above the Tasnee offer price since that announcement. On 16 September 2013 the Directors of Dyesol negotiated with Tasnee to extend the Exclusivity Period relating to the Convertible Note and the Additional Investment mentioned above. The chart below illustrates these significant events that occurred during the 2013 financial year and the impact they had on Dyesol’s share price and trading volume.

Source: Bloomberg and BDO analysis

5.2

Operations

Dyesol is a clean energy technology company with a focus on research and development leading to commercial development. It partners with leading multinationals with established routes to market, who seek to embed DSC photovoltaic functionality into their products.

Since commencing operations in 2004 Dyesol have focused on developing a suite of thoroughly tested DSC chemicals, components and equipment used in the production of DSC cells and modules to researchers and industrialists. The Company also provide custom manufacturing facilities for manufacturing Dye Solar Cell photovoltaic modules and specialist training, consulting and engineering solutions for the manufacture of these modules.

Dyesol operates internationally with operations spanning across the UK, USA, Italy, Switzerland and South Korea.

On 8 May 2013, Dyesol announced to the market that it had achieved a technical breakthrough in its field. It recorded a solid state efficiency of 11.3% at full sun, which was a significant improvement on the 5% efficiency levels achieved previously in 2010. This was followed by Ecole Polytechnique Federale de Lausanne’s (“EPFL”) announcement of an externally accredited official world record efficiency of 14.1% and other statements indicating efficiencies of greater than 15% being achieved in the laboratory.

-5.0 10.0 15.0 20.0 25.0 30.0 0.00 0.10 0.20 0.30 0.40 0.50 0.60 V ol u m e (m il li on s) Sh ar e P ri ce ($ )

Dyesol share price and trading volume history

Volume Closing share price

Announcement date

Technical breakthrough

1st Re-negotiaton

5.3

Recent fund raising activities

On 28 March 2012 the Company announced that it had successfully raised $5 million at an issue price of $0.18 per share through take-up by Shareholders of a share purchase plan and a supplementary placement to sophisticated investors.

On 28 June 2012, Dyesol announced its entitlement to the Australian Government’s R&D tax incentive of approximately $2.95 million. The Company’s entitlement for the 2013 financial year was approximately $2.84 million.

On 28 February 2013, Dyesol issued a $4 million redeemable convertible note to Tasnee, convertible at $0.166 per share. Under the subscription agreement Tasnee was also given the right to invest a further $16 million in Dyesol at $0.18 per share.

On 14 May 2013, the Company announced a share purchase plan to raise $2 million at a price of $0.166 per share. The share purchase plan was significantly oversubscribed and received valid applications of $22.53 million. As a result, on 11 June 2013, Dyesol increased the amount to be raised to $4 million.

5.4

Historical Balance Sheet

Source: Audited Financial Statements for the years ended 30 June 2011, 30 June 2012 and 30 June 2013

We note that the audit report included in the financial statements for the years ended 30 June 2013 and 30 June 2012 included an emphasis of matter relating to the Company’s ability to continue as a going concern and further progress the development of its technology and intellectual property, given the statement by directors that additional capital will be required.

Audited as at Audited as at Audited as at 30-Jun-13 30-Jun-12 30-Jun-11

$ $ $

CURRENT ASSETS

Cash and cash equivalents 5,167,332 2,510,305 6,293,440 Trade and other receivables 3,233,607 3,450,290 1,072,240

Inventories 970,644 1,399,869 1,616,814

Other current assets 351,014 309,468 349,105

TOTAL CURRENT ASSETS 9,722,597 7,669,932 9,331,599 NON-CURRENT ASSETS

Property, plant and equipment 1,083,954 2,022,958 2,868,517 Intangible assets 8,283,789 9,640,061 8,491,256 TOTAL NON-CURRENT ASSETS 9,367,743 11,663,019 11,359,773

TOTAL ASSETS 19,090,340 19,332,951 20,691,372

CURRENT LIABILITIES

Trade and other payables 2,638,796 2,144,243 3,103,407

Borrowings 3,430,173 1,170,437 1,150,847

Other financial liabilities - - 1,163,032

Provisions 498,839 224,771 216,269

TOTAL CURRENT LIABILITIES 6,567,808 3,539,451 5,633,555 NON-CURRENT LIABILITIES

Borrowings 1,190,283

-Provisions 91,356 386,085 361,100

Deferred tax liability 517,085 590,954 668,049 Other payables - - 184,727 TOTAL NON-CURRENT LIABILITIES 1,798,724 977,039 1,213,876

TOTAL LIABILITES 8,366,532 4,516,490 6,847,431 NET ASSETS 10,723,808 14,816,461 13,843,941 EQUITY Contributed equity 80,079,832 76,127,923 66,848,603 Other reserves 5,325,659 3,974,838 3,403,395 Accumulated losses (74,689,220) (65,290,070) (56,409,198) Capital and reserves attributable to the owners 10,716,271 14,812,691 13,842,800

Non-controlling interest 7,537 3,770 1,141

TOTAL EQUITY 10,723,808 14,816,461 13,843,941

Statement of Financial Position

We note the following in relation to Dyesol’s statement of financial position:

Cash and cash equivalents increased from $2.51 million at 30 June 2012 to $5.17 million at 30 June 2013. This increased cash position was mainly driven by cash receipts from customers of $1.22 million, the receipt of the R&D tax rebate of $2.96 million owing from the 2012 financial year, net borrowings of $4.00 million and proceeds from share issues of $4.00 million. These cash inflows were partially offset by payments to suppliers and employees of $9.04 million and

payment for product development costs of $1.14 million.

Trade and other receivables of $3.23 million at 30 June 2013 mainly comprises the R&D tax rebate receivable of $2.85 million which has since been received.

Property, plant and equipment of $1.08 million at 30 June 2013 comprise office furniture and equipment, plant and equipment, motor vehicles, leasehold improvements and computer software.

Intangible assets represent intellectual property and patents of $1.80 million, $3.04 million of product development costs and goodwill of $3.44 million. Intangible assets are recorded at cost and tested for impairment each year. An impairment was recorded as at 30 June 2013 which related to capitalised product development costs as a result of the transition from a liquid based to solid state DCS systems.

The current portion of provisions comprise a provision for employment benefits of $0.20 million and a make good provision of $0.30 million which relates to an estimate of the present value of the expenditure required to demolish any leasehold improvements at the end of the lease. Borrowings comprise secured and unsecured convertible notes. The secured convertible note relates to the $4 million Convertible Note issued to Tasnee. On 15 November 2013, the Company announced that Tasnee would immediately convert the Convertible Note into ordinary shares at the conversion price of $0.166 per share. Tasnee was issued approximately 24.7 million shares, representing a 9.99% interest in the share capital of Dyesol. The unsecured convertible notes were issued in previous financial years in three tranches, with a total face value of $1.17 million. Contributed equity increased from $76.13 million at 30 June 2012 to $80.08 million at 30 June 2013 as a result of the issue of approximately 24.1 million shares at $0.166 per share.

Without qualifying the audit opinion provided, the audit report included in the financial

statements for the years ended 30 June 2013 and 30 June 2012 included two emphasis of matters. For the year ended 30 June 2013 the first emphasis of matter was in relation to the significant uncertainty regarding the continuation of the Company as a going concern. It was noted that the Company requires additional cash from the receipt of a research and development tax incentive, a reduction in the Company’s cost base, the approval of the Additional Investment by Tasnee and potential government funding in order to continue as a going concern. The second emphasis of matter related to a material uncertainty regarding the impairment of non-current assets. The auditors concluded that there was inherent uncertainty regarding the assumption that commercial viability will be achieved to further progress DSC PV project and should this assumption prove to be incorrect the Company’s property, plant and equipment and intangible assets may be impaired.

5.5

Historical Statement of Comprehensive Income

Source: Audited Financial Statements for the years ended 30 June 2011, 30 June 2012 and 30 June 2013 We note the following in relation to Dyesol’s statement of comprehensive income:

Sales decreased from $1.84 million for the year ended 30 June 2012 to $0.96 million for the year ended 30 June 2013 as a result of the Company’s decision to prioritise major partner development projects for resource allocation purposes. However, Dyesol improved its gross margin over this period from 41.4% to 43.2%, up from 28.7% for the 2011 financial year.

Other revenue mainly comprises Government grants of $1.29 million and $0.79 million for the 2012 and 2013 financial years respectively.

Dyesol’s technical expenses have declined over the three year period to 30 June 2013. The reduction in technical expenses over the 2011 and 2012 financial years was predominantly driven by a reduction in materials expenditure from approximately $1.54 million in 2011 to $0.75 million in 2012. Technical expenses decreased to $4.81 million (from $6.6 million in 2012) for the year ended 30 June 2013, mainly as a result of a reduction in wages and salaries costs from $4.13 million in 2012 to $3.22 million in 2013 and a decrease in consultant costs from $1.61 million in 2012 to $0.68 million in 2013.

Management advise that a tighter focus on business development is reflected in the reduction in marketing expenses from $1.62 million in 2012 to $0.51 million in 2013.

Audited for the Audited for the Audited for the

year ended 30-Jun-13 year ended 30-Jun-12 year ended 30-Jun-11

$ $ $ Revenue Sales 957,094 1,839,836 1,413,302 Cost of sales (543,629) (1,078,733) (1,007,982) Gross profit 413,465 761,103 405,320 Interest revenue 89,877 61,628 161,786 Other revenue 914,536 1,367,170 1,172,428 Expenses Technical expenses (4,812,612) (6,569,267) (8,036,272)

Administration and corporate expenses (7,548,500) (6,139,787) (8,732,894)

M arketing expenses (510,425) (1,616,695) (2,366,781)

Borrowing costs (357,647) (75,210) (71,264)

Intellectual property expenses (518,013) (426,274) (568,658) Loss from continuing operations before income tax (12,329,319) (12,637,332) (18,036,335)

Income tax benefit _{2,933,123 3,759,328 751,784}

Loss from continuing operations after income tax _{(9,396,196) (8,878,004) (17,284,551)} Foreign currency translation differences _{455,117 (30,141) (516,797)} Total comprehensive loss for the year _{(8,941,079) (8,908,145) (17,801,348)}

Statement of Comprehensive Income

5.6

Capital Structure

The share structure of Dyesol as at the date of this Report is outlined below:

Source: Dyesol share registry information

The range of shares held in Dyesol as at that date of this Report is as follows:

Source: Dyesol share registry information

The ordinary shares held by the most significant shareholders as at the date of this Report are detailed below:

Source: Dyesol share registry information

Number

Total ordinary shares on issue 247,310,887

Top 20 shareholders 137,131,139

Top 20 shareholders - % of shares on issue 55.45%

Range of Shares Held

1 - 1,000 822 384,623 0.16% 1,001 - 5,000 1,453 4,119,063 1.67% 5,001 - 10,000 797 6,244,271 2.52% 10,001 - 100,000 1,934 59,676,659 24.13% 100,001 - and over 216 176,886,271 71.52% TOTAL 5,222 247,310,887 100.00% Percentage of Issued Shares (%) Number of Ordinary Shareholders Number of Ordinary Shares Name

JP Morgan Nominees Australia Ltd 83,863,875 33.91%

National Industrialization Company of Saudi Arabia (Tasnee) 24,698,795 9.99% HSBC Custody Nominees (Australia) Ltd 2,767,821 1.12%

CS Fourth Nominees Pty Ltd 2,666,959 1.08%

Subtotal 113,997,450 46.09%

Others 133,313,437 53.91%

Total ordinary shares on Issue 247,310,887 100.00%

Number of Ordinary Shares Held

Percentage of Issued Shares (%)

6.

Profile of the National Industrialization Company of Saudi Arabia

(Tasnee)

6.1

History

Tasnee was incorporated in 1985 as the first joint stock industrial company fully owned by the private sector after listing on the Saudi Arabian Stock Exchange. Tasnee has grown to become the second largest industrial Saudi company and the second largest producer of titanium dioxide in the world. It is headquartered in Riyadh in Saudi Arabia.

Tasnee primarily erects, manages, operates, and owns petrochemical, chemical, plastic, engineering, and metal projects, as well as provides industrial services. Its products include titanium dioxide used in painting, inks, plastic, rubber, paper, textile, ceramic tiles, cosmetics and pharmaceutical preparations. Tasnee operations include the subsidiary, Cristal, also known as the National Titanium Dioxide Company and through this subsidiary it is the second largest producer of titanium dioxide, with several titanium mines located in Australia.

Tasnee also manufactures lead through the recycling of spent batteries, steel wires consisting of mattress springs, welding rods, cable shielding wires, deformed wires for pre-cast concrete, and galvanized wires of low and high carbon content. In addition, it offers axles for the transport of sensitive material, such as molten sulphur and foodstuff. Further, the company provides automotive batteries, plastic sheets comprising polycarbonate, industrial membranes and injection products comprising casings and caps for car batteries, and paint pails. Tasnee also specialises in polyolefins marketing, sales and distribution, technical inspection, life safety and fire protection, management systems, hazardous waste management, analytical testing, and environmental engineering services.